Four of the five initial public offerings (IPOs) that hit the market this week got an overwhelming response, as attractive valuations and the possibility of sizeable listing gains drew investors.
The non-institutional money from retail and high-net-worth individuals that was blocked across the five IPOs is estimated to be in the vicinity of ₹1 lakh crore. The number of applications were on the higher side as well. Tata Technologies and IREDA, for instance, saw over 73 lakh and 30 lakh applications, respectively.
Tata Technologies’ offering, the first from the Tata Group in 20 years since TCS, was oversubscribed 69 times as of 5 p.m. on Friday. The quota for qualified institutional buyers was subscribed to over 200 times, while that for non-institutional investors was subscribed to 62 times. The retail, shareholder, and employee portions were subscribed 16.5, 29.2, and 3.7 times, respectively.
“The Tatas are a huge brand and enjoy a strong franchise, which is why we saw strong interest from all investor categories,” said V Jayasankar, Managing Director and Member of the Board, Kotak Investment Banking.
Gandhar Oil Refinery saw bids for 65 times the shares on offer, with the QIB and non-institutional portions getting subscribed to 129 and 64 times, respectively. Flair Writing Industries got subscribed 49 times, with QIB and non-institutional portions receiving bids for 122 and 35 times the shares on offer, respectively. IREDA, which closed on Thursday, drew an overall subscription of 39 times.
Fedbank Financial was an outlier and got bids for a little over twice the shares on offer. Market observers believe that the IPO suffered from a perception issue after the recent RBI decision to increase the risk weight on categories of unsecured loans.
“The general buoyancy in the market, coupled with the large domestic pool of money, has helped the offerings sail through comfortably. Valuations have been attractive as promoters have been pragmatic and have listened to investor feedback,” said Akhil Kejriwal, Executive Director, Axis Capital.
According to Jayasankar, the reduction in leverage in the investing system due to the regulatory diktats helped non-institutional investors spread their bets across issues. For example, a retail investor putting ₹2 lakh in one issue would probably get an allocation of ₹15,000-20,000 if the issue is heavily subscribed. He would be better off investing across all issues and getting a small share in all issuances.
Analysts also attribute the steep grey market premium as a major reason for the robust subscriptions across issues.
The market has seen a flurry of small and mid-sized IPOs hit the market this year. This is expected to continue for a few more months prior to the general elections, experts said.